Shares of European companies leaning heavily on artificial intelligence (AI) took another hit this week, as the debut of more powerful AI models stoked fears that key industries—from software to data services—could be overtaken by the very technology they’re betting on.

European Tech Stocks Under Pressure

Software giants SAP (Germany) and Dassault Systèmes (France) led declines on Tuesday, following a downgrade of U.S. peer Adobe a day earlier. Other European names have also slumped since mid-July:

LSEG (London Stock Exchange Group): down 14.4%
Sage (UK software firm): down 10.8%
Capgemini (French IT consulting): down 12.3%

These companies—often labeled “AI adopters”—had enjoyed strong valuations as investors sought ways to ride the AI boom in a region with relatively few pure AI suppliers. Now, confidence is wavering.

The Trigger: GPT-5 and Claude for Finance

The turning point came with two major launches:

OpenAI’s GPT-5 (last week) — a step-change in capability from previous models.
Anthropic’s Claude for Financial Services (July 15) — a tailored AI app raising questions about the future role of traditional data providers like LSEG.

“With each new release, GPT or Claude is multiples more capable,” said Kunal Kothari, fund manager at Aviva Investors. “The market is thinking: this could challenge entire business models.”

Markets Diverge

While AI adopters fell sharply, broader markets moved higher. Since mid-July:

FTSE 100: up 2.5%
STOXX 600: up 0.6%
U.S. indexes: hitting record highs, driven by Big Tech

The problem: many European adopters trade at steep price-to-earnings multiples, leaving them exposed. SAP, for instance, trades around 45x earnings compared with the STOXX 600 average of 17x.

Will AI “Eat Software”?

The selloff reignited debate over Nvidia CEO Jensen Huang’s famous 2017 prediction: “AI is going to eat software.”

Analysts say the risk isn’t uniform:

More vulnerable: general-purpose software and data services that can be replicated by generative AI.
Better protected: mission-critical enterprise applications, or software embedded deeply into client workflows.

“Enterprise-grade applications are less exposed,” said Paddy Flood of Schroders. “Replacing them is complex, and trusted vendors still hold strong value.”

Examples cited include Experian, whose unique credit data is tightly integrated into financial institutions’ lending workflows, and Sage, which is entrenched in SMEs’ accounting systems.

Still, as Kothari cautioned: “I just don’t think data is a big enough moat anymore.”

An Opportunity in Disguise?

Some investors argue the rout could create opportunities.

“Certain companies will turn AI into a tailwind for earnings,” said Bernie Ahkong, CIO at UBS O’Connor. “But they need to prove it—and that will take time.”

The challenge now is urgency: big AI spenders must start delivering tangible returns before markets lose patience.

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